'Resource commitments' means your job

Avnet is looking to cut up to $50m off its expenses bill and reduce the workforce after releasing preliminary results for fiscal Q1 that show a near double digit sales slide.

The distributor says turnover will be approximately $5.85bn, down nine per cent year-on-year for the period ended 29 September, and it's the Technology Solutions (TS) division that's still causing most of the pain.

"It appears the uncertain microeconomic conditions continue to negatively impact key areas of end demand in our served markets as our overall revenues for the quarter finished weaker than expected," said CEO Rick Hamada.

Sales at the Electronics Marketing unit, which sells electronics components, are forecast to be roughly $3.65bn, down from $3.8bn in fiscal Q1 a year ago but the the fall at TS is more marked, down some $400m on 12 months ago to $2.2bn.

In its fiscal fourth quarter ended 30 June, turnover at Avnet went down nearly nine per cent year-on-year to $6.3bn but it was TS EMEA that was hit hardest, with revenues sliding 13.7 per cent.

This time around Hamada said that TS in the Americas finished the quarter weaker than expected.

"The shortfall to our expectations was more acute at our TS business, where we experienced a second consecutive quarter of weaker than expected transaction activity…as customer delayed IT projects," he said.

Sales at the EM unit were in line with expectation, Hamada added, as the Asia operation fared better than forecast in its lower-margin biz but this was offset by a "pronounced slowdown in the Americas region".

The upshot is that Avnet has to take further corrective action to get costs in line with market realities - it's not the only distributor, reseller or vendor to be swallowing a bitter pill in the current economic climate.

"We are evaluating resource commitment across the portfolio and have identified further expense alignment actions in addition to expense reductions of $40m - $50m that we announced in August," said Hamada. ®